Using Forex Trading systems for successful trading online
The secret to a Forex trader’s success is a successful Forex trading system. Finding the right system for you is a long and sometimes painful process. You may go through many failed trading systems before you find the right one for you. The key is to remember that each trader is individual and no one FX system works for all traders. And with the advent of social trading, there are even more parameters to consider, since you can now incorporate copy-trading into your portfolio. At eToro, our experts have reviewed and developed many successful systems and are now proud to bring you these few tips on how to develop your own system.
Decide on your time frame
Time frame is essential in making your own system. Your chosen time frame affects whether you make many trades at any given time or few trades, whether you make smaller trades or larger trades, whether you’re scalping, day trading or investing. This is a decision that determines what time frame you will be looking for when identifying trends or indicators. If you’re a trader that likes to read daily Forex reviews and spend a lot of your time monitoring the currency market, you might as well trade in a shorter time frame. If at the end of the day you prefer to look at the big picture and analyze macro economic factors you might want to stick to a longer time frame. Your results will definitely be influenced by how convenient your time frame is to you personally. And the same goes for social trading. If you’re comfortable trading in a specific time frame, you shouldn’t copy a trader with a completely different time frame because this will make you copy-trading activity harder to monitor and control. Instead, use the Guru Finder to sort traders by “average trade duration” among your other parameters.
Find trend indicators and confirmation
If you take any trading system in the Forex market, the major portion of the system will be dedicated to finding reliable trend indicators. The most popular of these is the moving average crossover system in which the identical positioning of the simple moving average and the exponential moving average marks the beginning of a new trend. Without using trend indicators you might as well be gambling on which currency will go up or down, so it’s crucial that you take them into account when creating your system. The charting suite that you’ll find in the eToro WebTrader enables you to automatically plot these averages on the interactive charts, making your work that much simpler.
Money Management
Money management is perhaps the most important part of a FX system. It determines what amount of your overall capital you can risk on each trade and how you diversify your portfolio. The evaluation of your money management technique has to depend on how conservative or risky of a trader you are. Most professional traders risk between 2% and 5% of their capital of any one trade, because the more you lose the harder it becomes to make up for your losses. Even the highest risk takers don’t stray over the 5% line. The most important thing to keep in mind is that looking for “the big win” almost always ends up in ruin. The financial market is highly unpredictable, so it’s better to play it safe and to be prepared for losses. Sometimes it may even seem like the market is rigged against you, but it’s important to stick to your system and not to lose faith.
